When most advisors and investors are looking to build China tech exposure, they tend to think of the same companies. If it’s not an AI giant, it’s a proven internet or tech-related company, like Tencent, Alibaba, or NetEase.
To an extent, this can make sense. Given how tariffs are creating uncertainty in China’s markets, it seems sensible to pick companies that are already portfolio staples. However, tariff tensions could create opportunities in other sectors of the China’s markets.
For example, recent insights from KraneShares showed opportunities within China’s IPO market. In particular, the KraneShares piece highlights how trade tensions are increasingly making domestic China tech companies an easier sell.
Back-and-forth tariff threats, as KraneShares notes, have already added extra opportunities for China’s domestic operations. These domestic businesses could be far less at risk of tariff exposure compared to international-focused peers. Additionally, new China regulations are making companies wait longer before being able to execute on overseas listings.
Counting STARs
All in all, these domestic-favored factors could kick-start more IPOs on the STAR Market. The STAR Market, in particular, focuses on innovative China companies in the science and tech sector.
“Unlike many other Chinese sectors, the STAR Market companies have a natural protective advantage. Many of these tech companies serve primarily domestic markets or have diversified global operations that aren’t heavily dependent on U.S. market access,” KraneShares reported. “The Chinese government views technological self-sufficiency as a strategic priority, providing policy support and investment that further insulates these companies from external pressures. This gives STAR Market companies a natural moat in their massive home market.”
Gaining direct exposure to companies within the STAR Market isn’t nearly as tricky as one would assume. One accessible means of doing so is through the KraneShares SSE Star Market 50 Index ETF (KSTR).
KSTR looks to offer long-term returns by tracking the STAR 50 Index. As the title implies, this index tracks the 50 largest companies on the STAR Market.
By taking on KSTR, investors can tap into the factors working in favor of China tech IPOs. This can offer significant long-term potential as regulation and macroeconomic conditions work in favor of domestic expansion.
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